Olacabs to buy TaxiForSure to take on competitors like Uber; deal likely at Rs 1,250 crore

According to three people directly involved in the negotiations, Olacabs, backed by Japan's SoftBank, will pay cash and offer stock.

BENGALURU: Olacabs is on the verge of buying rival Taxi-ForSure for about $200 million (Rs 1,250 crore), an aggressive move which sets up a straight fight with Uber for dominance of India's taxi aggregation market.

According to three people directly involved in the negotiations, Olacabs, backed by Japan's SoftBank, will pay cash and offer stock in what will be the second-largest buyout in the consumer Internet market after Flipkart's acquisition of fashion portal Myntra for an estimated $370 million last year.

"The term sheet has been signed and in the next 10 days the finer details will be chalked out," said one of the sources, referring to the document which spells out the terms of a potential transaction. TaxiForSure and Olacabs, both based in Bengaluru, declined comment.

The sources who briefed ET about the talks said the aim of combining forces is two-fold.

This includes taking on Uber, which is valued at $40 billion, and focussing on lowering costs as regulators step up oversight of the taxi app market.

"The transport aggregation business is a fairly tricky space right now, given the regulatory scrutiny," said Srikanth Narasimhan, director at boutique investment bank Veda Corporate Advisors, adding however that "this is a passing phase."

Globally, taxi aggregators are in talks to form an international alliance against Uber, potentially linking up regional players including Olacabs, Singapore's GrabTaxi, and San Franciscobased Flywheel.

"This acquisition marks a significant development in the taxi app business in India," said Sunil Wattal, who teaches management information systems at Temple University in the United States. "This will be problematic for Uber because it does not have any offline presence and no stated plans of being in that space."

Olacabs, cofounded by IIT-Bombay alumnus Bhavish Aggarwal and his collegemate Ankit Bhati, received $210 million in funding led by Japanese communications conglomerate SoftBank in October.

Just two months before, TaxiFor-Sure had snagged $30 million from Accel and Qualcomm, but Olacabs' fundraising demonstrated that momentum had swung its way.

TaxiForSure has spent much of the last two months scouting for additional funding to keep pace with competitors who are backed by deep-pocketed investors. Two weeks back, Bengaluru-based Serendipity Infolabs, which owns and operates online taxi booking platform TaxiForSure, raised a bridge round of $6 million from its existing investors Accel Partners India, Helion Venture Partners and Accel Partners US, among others.

The bridge round valued the four-year-old company at about $125 million. TaxiForSure held discussions with Carzonrent and Uber before sealing the deal with Ola, said one person directly involved in the talks. TaxiForSure is founded by IIM-Ahmedabad graduates Raghunandan G and Aprameya Radhakrishna.

Roiled by a public relations crisis after the alleged rape of a passenger by an Uber driver in Delhi in December, taxi aggregators have been scrambling to fall in line with revised regulations laid down by transport authorities.

The cab hailing apps, including TaxiForSure, Olacabs and Uber, do not operate their own taxis, but provide the technology platform that links taxi owners and operators with passengers and therefore claim to be technology companies.

This has cut no ice with authorities who have insisted that they obtain a radio taxi licence.

TaxiForSure is seen as an attractive buy also because it works with taxi operators, unlike Uber and Ola which work directly with drivers. With this deal, Ola gets connected to all of TaxiForSure's cab operators.

Vivek Wadhwa, a fellow at Stanford Law School and a director of research at Duke University was of the view that the acquisition marks the growing maturity of the Indian entrepreneurial space, as smaller companies come together to take on the larger players. This, he noted, will lead to the creation of new startups with new business models and better products.

"I think this is a good thing because it will create a strong competitor for Uber."